At the beginning of this year, many were hoping for a turnaround in the second half. However, reality has delivered a sobering blow. Layoffs, acquisitions, stalled IPOs—bad news keeps coming, signaling what appears to be the end of cross-border e-commerce's "golden era."
I. The Fall of a Former Star: The Struggles of UK Furniture Giant Made.com
Made.com, the UK furniture e-commerce platform founded by Chinese entrepreneur Ning Li, is currently facing significant challenges. Once a shining star in the industry, the company now confronts layoffs, potential sales, and possibly cutting one-third of its workforce.
What led to Made.com's current predicament?
The answer lies in both internal and external factors:
- Deteriorating External Environment: The fading pandemic boom, soaring shipping costs, and worsening inflation have created a perfect storm. In the second half of 2021, ocean freight rates skyrocketed, causing Made.com's shipping costs to jump from £8.2 million in 2020 to £45.3 million in 2021. With consumers tightening their belts, the company couldn't pass all costs to customers, severely squeezing profit margins.
- Business Model Limitations: While innovative, Made.com's model proved too dependent on external conditions. The company operated similarly to fast-fashion brands—posting furniture designs online, letting customers vote on favorites, then launching pre-sales. After reaching minimum order quantities, production would begin at factories in China and Vietnam before shipping to UK customers.
This model excelled during market upswings but struggled when conditions worsened. Made.com had to predict demand in advance—miscalculations led to inventory pileups. Additionally, long shipping cycles left the company vulnerable to disruptions.
Financial reports show Made.com achieved £434 million (≈$34.36 billion) revenue in 2021, a 38% year-over-year increase. However, for 2022's first half, the company projected annual losses could reach £70 million (≈$55.4 million). To survive, Made.com resorted to layoffs and seeking buyers—a dramatic fall for this once-prominent publicly traded company.
Made.com's case serves as a warning to all cross-border e-commerce businesses: in today's rapidly changing market, complacency isn't an option. Only through continuous innovation and adaptation can companies survive intense competition.
II. A Rocky Road to IPO: Zhejiang's Zibuyu Group's Third Attempt
In contrast to Made.com's struggles, some Chinese cross-border sellers are aggressively pursuing IPOs. Hangzhou-based Zibuyu Group recently submitted its third listing application to the Hong Kong Stock Exchange.
Founded in 2011, Zibuyu specializes in fast-fashion apparel and footwear, earning the nickname "China's Zara." Leveraging supply chain advantages, the company successfully penetrated mid-to-low-end Western markets.
According to its prospectus, Zibuyu generated $12.78 billion revenue in H1 2022, up 16.07% year-over-year, with $9.69 billion gross profit and $79 million operating profit.
While these figures appear strong, deeper analysis reveals concerning issues:
- Over-Reliance on Amazon: Over 90% of Zibuyu's revenue comes from Amazon. Any policy changes or increased competition on the platform could significantly impact performance. In H1 2022, Amazon sales accounted for $11.57 billion (over 90%), while the company's independent website contributed only $75 million (5.8%). This concentration creates substantial risk—Amazon policy adjustments or commission increases could compress margins, while account suspensions could devastate operations.
- High Return Rates: Due to product quality and logistics issues, Zibuyu's Amazon return rate reached 25.5%. High returns increase operational costs and damage brand trust. The company attributes rising returns to U.S. inflation and interest rate hikes affecting consumer behavior. Regardless of cause, this issue demands attention—returns increase logistics costs, complicate resales, and may trigger Amazon penalties.
- Declining Net Profits: Despite revenue growth, H1 2022 net profits plummeted 46.33% to $61.314 million due to rising returns and sales expenses. For an IPO-seeking company, weakening profitability presents an unfavorable signal.
Zibuyu's path to going public remains challenging. While showing growth, its Amazon dependence, return rate issues, and profit declines raise investor concerns about future prospects.
The company must diversify beyond Amazon, strengthen branding, improve product quality, and reduce returns to enhance profitability.
III. The Future of Cross-Border E-Commerce: Who Will Survive This Crisis?
Made.com's struggles and Zibuyu's challenges reflect broader difficulties facing cross-border e-commerce. After years of rapid growth, the industry now enters an adjustment period as pandemic benefits fade, competition intensifies, and costs rise.
How should companies respond?
- Strengthen Fundamentals: Enhance operational capabilities, product development, resource integration, and financial control to build refined business models. During downturns, companies must focus on internal management, operational efficiency, and cost reduction while investing in competitive product development.
- Diversify: Expand sales channels beyond single-platform dependence. Develop independent websites to build brand value and customer loyalty. Over-reliance on one platform creates substantial risk—companies should explore multiple channels while strengthening brand recognition.
- Embrace Change: Monitor market trends closely and adjust strategies accordingly. Remain flexible to overcome challenges and seize emerging opportunities. In volatile markets, adaptability proves essential for survival.
Despite 2022's overall downturn, some companies like Shenzhen Huabao New Energy and Dongguan Aohai Technology exceeded expectations. Their success demonstrates that with strong fundamentals and adaptability, growth remains possible even in adversity.
Cross-border e-commerce's future presents both challenges and opportunities. Only those embracing change, innovating continuously, and pursuing excellence will survive intense competition and ultimately succeed.